Medvedev seeks hi-tech partnership in China

Russian oil will be pumped to China by next year. President Dmitry Medvedev have taken part in the opening of the new pipeline from Russia with Chinese leader Hu Jintao while visiting the country.

Meeting for the fifth time this year, the presidents of Russia and China both stressed the strategic importance of their alliance.

“Russia and China are committed to strategic partnership concerning all issues. It helps out countries to adjust to a constantly changing geopolitical situation. We have good co-ordination concerning the international agenda and regional issues,” announced the Russian president during his visit to China.

But the two giant countries also look set to boost trade and security in the region.

With two thirds of the cabinet traveling with the Presidents, the Russian delegation in China proved among the largest in recent years, and they all did their homework.

The leaders have signed 10 agreements, most of them dealing with energy co-operation in the region.

Russia will build two more nuclear reactors in China in addition to another two completed in 2007.

The leaders also signed a broad political declaration in which they pledged continuing support for each other on the international arena. They also called on the creation of what they called a new democratic world order, based on equality for all and same rules for all, denying the hegemony of one country or a group of countries, with an apparent reference to the US.

Also, presidents have attended a completion ceremony for the Chinese section of the first oil pipeline to link the two neighbors. The talks to build this pipeline began 15 years ago but the construction began only in 2009. The pipeline will be finally finished around November and the first oil is expected to flow by the end of this year.

About 400,000 barrels of Russian crude oil crosses the border with China each day. This quantity is expected to triple once the pipeline reaches full capacity.

It is a remarkable occasion for both countries, because when the pipeline reaches its full capacity, which is expected in 2011, it will increase the quantity of crude oil sold to China threefold. This means China will get its hands on more hydrocarbons, so badly needed, and for Russia it means diversifying its oil supply away from the European markets.

The relationship between Russia and China could hardly be better than today, both economically and politically. In 2009, China surpassed Germany for the first time as Russia’s largest trading partner.

Overall trade turnover between the two has reached US$40 billion and is expected to reach $50 billion in 2010.

Politically, the two countries are also doing pretty well, and the leaders have stressed today they are ready to take this relationship to a new level.

Still, there are definitely sharp corners, such as weapons trade, for example. Back in the 1990s, China was the leading buyer of Russian weaponry. At some point purchases accounted for 50 per cent of Russian weapons exports.

But over the last few years, Russia has intentionally scaled back on selling its weapons to China. The main reason for this are likely to be concerns that Moscow have of China using its technological and scientific progress to copycat Russian weapons and then sell them at dumping price to third countries, seriously undercutting Russia’s share of the world arms market.

Russia and China are currently in the midst of very difficult talks on the price of Russian gas – a gas pipeline is planned to pump Russian gas to China, but again a price dispute has been stalling the project.

Chinese officials argue that Russia should sell its gas below market price because, if it were not for China, they say, Russia would be unable to tap the enormous Siberian reserves. In turn, Russian officials say if not for Russia, Chinese buyers, especially those in Northern provinces, would have to buy both oil and gas at much higher prices anyway, and this type of dispute has been going on for years and years.

But despite some reservations, the two countries are keen to increase the turnover – but not at the expense of technological piracy.

Back in 1950s and 1960s, the Soviet Union did much to industrialize the People’s Republic of China, providing equipment and education for Chinese specialists. Now history has come full circle and it is China which is the most-industrialized country and modern economy in Asia and now it is Russia’s turn to benefit from co-operation with its eastern neighbor. On the wave of the modernization program currently underway in Russia, one of the Russian newspapers even called China “a country where modernization reigns.”

The Russian President has said on a number of occasions that he sees his main goal as a president in upgrading the Russian economy, both in terms of infrastructure and technology. Obviously, China has a lot to offer to Russia in this respect.

“In the recent decade China made a breakthrough in high technology and co-operation in this field is mutually beneficial for our countries. Nowadays we both have some ideas and experience to show to each other, so we have great perspective in the high-tech [sector],” commented Russia’s Foreign Minister Sergey Lavrov.

President Medvedev plans to visit a trade expo in Shanghai on the third day of his visit to China, where he will meet with top Chinese businessmen and Chinese officials trying to take the Russian-Chinese partnership to a level beyond the traditional energy sphere.

Russia needs political stability, predictable economic policy and peaceful foreign policy to achieve good results in modernization of its economy, believes Dr Evgeny Bazhanov, vice-rector of the Diplomatic Academy of Russia's Foreign Ministry.

As good as relations may be, some say the invisible presence of the US is still tangible, so Russia and China want to work together with the US on many issues, including security and counter-terrorism. “The purpose of the two countries is not to work against the US, but together with the US,” he said.

Dr. Ekaterina Koldunova from the Moscow State University of International Relations believes that despite Russia’s decision to re-direct its oil flow to the East, Russia is still concerned with the situation in Europe.

“However the situations in these two regions are quite different now,” she said. “The situation in Europe is quite settled and we are not witnessing any tough gas or oil wars in this direction right now. With China we see some controversial issues. Yes, we did agree about oil supplies and we did agree about gas supplies, but we should remember quite well that China is also diversifying its suppliers. Not only Russia is diversifying its supplies. We know that China is building very good relations with Central Asian states, with Australia, with South Asian states.”

“There are plans to supply gas to China as well, but there are no agreements on the exact price rates at the moment,” Koldunova added. “If we compare the prices which are already agreed by China and Turkmenistan, for example, we require a higher price.”